Relocating to a new state can significantly impact your tax obligations. State residency rules vary widely and can affect income tax, property tax, and eligibility for deductions or credits. Understanding how residency is determined is essential for taxpayers planning a move.
Residency and Domicile: Each state has its own definition of residency. Generally, a resident is someone who is domiciled in the state or meets a statutory presence test, such as spending more than 183 days in the state. Domicile refers to a person’s permanent home—the place they intend to return to and make their primary residence. Establishing domicile involves demonstrating intent through actions such as changing your driver’s license, voter registration, and primary banking relationships.
183-Day Rule: Many states apply a 183-day rule to determine statutory residency. If an individual spends 183 days or more in a state and maintains a permanent place of abode there, they may be considered a statutory resident and subject to tax on their worldwide income, even if they claim residency elsewhere. Partial days count as full days, and states can use various records to track days spent within their borders.
Changing Residency: To successfully change residency, individuals must clearly establish domicile in the new state and sever significant ties with the former state. This includes selling or renting out property in the prior state, terminating club memberships, transferring professional licenses, and relocating personal possessions. Updating legal documents, such as wills and trusts, can further reinforce the change. States may conduct residency audits to challenge claims, particularly when individuals move to lower-tax states like Florida.
Spouses Living in Separate States: If one spouse relocates to a new state while the other remains in the former, each individual’s residency status is determined independently. This could result in separate state filings and differing residency statuses for tax purposes. It is important to maintain clear documentation to support each person’s claim of residency and avoid dual taxation or audit exposure.
Part-Year and Nonresident Returns: If a taxpayer relocates mid-year, they generally must file a part-year resident return in the state they left and the state they moved to. Each state taxes income earned while residing within its borders. Proper allocation of income and detailed recordkeeping are essential.
Reciprocity Agreements: Some neighboring states have agreements that simplify taxation for commuters. For example, Pennsylvania and New Jersey have a reciprocal tax agreement that allows residents to pay income tax to their state of residence, regardless of where they work. Employees must file a certificate with their employer to avoid withholding in the work state.
Remote Work and Convenience Rules: Remote work arrangements can create complex tax situations. States like New York apply the “convenience of the employer” rule, which may require nonresidents to pay income tax earned remotely if their primary office is in New York. Pennsylvania also applies a similar rule. Florida, which has no state income tax, does not impose such rules.
Dual Residency and Double Taxation: In a tax year, it is possible to be treated as a resident by more than one state. This dual residency can result in both states taxing the same income. Some states offer credits for taxes paid to other jurisdictions, which can reduce the burden of double taxation. However, these credits may not always eliminate all liabilities, particularly when income is sourced differently by each state.
State Income Tax Rates: Tax rates also vary. For 2025, Pennsylvania imposes a flat income tax rate of 3.07%. New Jersey has a graduated rate structure, ranging from 1.4% to 10.75%. New York’s income tax rates range from 4% to 10.9%. Florida does not levy a state income tax, making it a popular choice for individuals seeking to reduce their overall tax burden.
Property and Sales Tax Considerations: Beyond income taxes, moving can affect other state and local taxes. Property tax rates and available exemptions vary. For example, Pennsylvania offers the Homestead Exclusion, New Jersey provides property tax deductions and credits for eligible homeowners, and Florida offers a Homestead Exemption that significantly reduces property taxes for permanent residents. Sales tax rates also differ, affecting the cost of goods and services.
Documentation and Audit Preparedness: States may request documentation to support residency claims, especially during audits. Records such as utility bills, travel logs, lease agreements, and financial statements help demonstrate presence or absence from a state. Maintaining consistent and credible documentation is critical, especially when splitting time between states or dealing with multiple homes.
Residency status affects nearly every aspect of an individual’s state tax obligations. Given the complexity and potential for audits, taxpayers should understand the rules that apply in each relevant state and take steps to establish domicile when moving. Severing ties with the prior state, keeping thorough documentation, and planning can help avoid costly mistakes. Contact your Stephano Slack tax manager or partner at 610-687-1600 or TaxInfo@StephanoSlack.com for expert support with compliance and to avoid unexpected tax issues.
Author Jackie Himes, CPA, partner, is a trusted authority in serving high-net-worth individuals and closely held businesses. She provides strategic financial guidance that fuels growth and sustainability. She can be contacted at 610-710-4057 or Jhimes@stephanoslack.com.
Disclaimer: This content is for informational purposes only and doesn’t constitute professional advice.
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